Business Directories

US takes Apple to trial over e-books price-fixing

New York, June 2, 2013

Apple Inc goes to trial on Monday over allegations by federal and state authorities that it conspired with publishers to raise the price of e-books.

The trial pits the maker of the popular iPad and iPhone against the U.S. Justice Department in a case that tests how Internet retailers interact with content providers.

"This case will effectively set the rules for Internet commerce," said David Balto, a former policy director for the U.S. Federal Trade Commission.

The Justice Department filed its case against Apple and five of the six largest U.S. book publishers in April 2012. The lawsuit accused them of conspiring to increase e-book prices and break Amazon.com Inc's hold on pricing.

Apple is going to trial alone after the five publishers agreed to eliminate prohibitions on wholesale discounts and to pay a collective $164 million to benefit consumers.

The U.S. government is not seeking damages but instead an order blocking Apple from engaging in similar conduct. However, if Apple is found liable, it could still face damages in a separate trial by the state attorneys general and consumers pursuing class actions.

Based on a comment by the presiding judge at the final hearing before the trial, Apple may face an uphill battle.

"I believe that the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books," U.S. District Judge Denise Cote, who is hearing the case without a jury, said on May 23.

While those comments suggested Apple might be smart to seek a settlement, Chief Executive Tim Cook said in an interview Tuesday with All Things Digital that Apple was "not going to sign something that says we did something we didn't do."

Apple may be calculating that future damages claims by states and class actions make it worth going to trial, said John Lopatka, a law professor at Pennsylvania State University.

"Apple might think, 'We may lose at the trial level, but we may well convince an appellate court the trial judge mischaracterized the evidence," Lopatka said.

Neither side disputes that in 2009 publishers were concerned about low prices for e-books resulting from the dominance of Amazon.com, which launched its Kindle e-reader in 2007.

As it prepared to launch its iPad and was looking into opening an electronic bookstore, Apple has said it was entering a "market in turmoil," with growing tension between the publishers and Amazon.

Amazon, which declined comment, was selling 90 per cent of all e-books in 2009. It was buying books wholesale and at times selling them at a loss, pricing them at $9.99, with the goal of promoting its Kindle.-Reuters